Buy Alkem Laboratories; target of Rs 2100: Bonaz Capital

Axis Direct is bullish on Alkem Laboratories has recommended buy rating on the stock with a target price of Rs 2100 in its research report dated June 06, 2017.
Revenue was in line but EBITDA at Rs 1.49bn was 27% below estimate due to higher other expense on launch of OTC division in India (launched Pregakem and Tiger balm). De-growth in anti-infective (40% of domestic sales) led to modest 7% YoY domestic growth. It outpaced domestic market growth across its key segments; however, it expects Q1’18 to be challenging for domestic business ahead of GST rollout. US (up 19% YoY vs. our estimate of15%) continue to scale up.ina000003197
Outlook
To factor in soft Q1’18 and increasing sector headwinds, we cut FY18 EPS by 12% and TP to Rs 2,100 (21xFY19E EPS) vs. Rs 2,200 earlier. Maintain BUY, as Alkem remains in a sweet spot to deliver steady growth along with margin improvement on its strong positioning (brands, sales force) in domestic market and expected scale-up in US. Also, its strong C/F and B/S (net cash of Rs 7.2 bn) enable acquisitions.bonaz capital

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